The Treasury has cut its forecast to six per cent from 6.5 per cent. PHOTO | FILE
What you need to know:
The Treasury has cut its 2015 growth forecast to six per cent from 6.5 per cent in line with a deteriorating growth outlook for economies across the world.
The World Bank put the 2015 growth at 5.4 per cent, lower than a previous estimate of six per cent, and forecast the economy would expand 5.7 per cent in 2016, down from 6.6 per cent.
The World Bank and the Treasury Thursday trimmed Kenya’s 2015 growth forecasts due to the volatile shilling, weak revenues and sluggish exports, signalling a slowdown in business activity and jobs creation.
The World Bank put the 2015 growth at 5.4 per cent, lower than a previous estimate of six per cent, and forecast the economy would expand 5.7 per cent in 2016, down from 6.6 per cent.
The Treasury has cut its 2015 growth forecast to six per cent from 6.5 per cent in line with a deteriorating growth outlook for economies across the world.
The reduced economic activity look set to dim corporate Kenya’s ability to generate profits in what could ultimately depress companies’ ability to hire more staff and up the wages of their workers.
“These estimates ... take into account more recent data on exchange rate, inflation, fiscal consolidation and balance of payments pressures,” the World Bank said in a report.
Fiscal consolidation refers to the policy of reducing deficits and accumulation of debt. This is an issue now due to falling revenues and rising expenses.
The shilling that has shed about 14 per cent of its value to the US dollar since the beginning of the year to trade at Sh103, weakened by falling revenues from tourism and horticulture — the key foreign exchange earners amid a rising import bill.
Tourism, once the highest foreign exchange earner, has borne the brunt of terror attacks that has prompted Western countries to issue travel alerts.
The Kenya Revenue Authority collected Sh181.2 billion in the first two months of the current financial year, which was below the expected average for the period, the Parliamentary Budget Office (PBO) said.
Domestic borrowing is also below the target because of the high interest rates. The yield on Kenya’s short-term Treasury debt has spiked to above 20 per cent in recent weeks.
Treasury secretary Henry Rotich said the government expects to catch up on revenue shortfalls accrued so far this fiscal year and was planning to hire consultants to boost tax revenues.
The Bank’s forecast means growth would be 0.1 percentage points higher than 5.3 per cent the country recorded last year and 4.7 per cent in 2013.
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